Ian Cooper
Deal Advisory Partner - Transaction Services
What is a Reporting Accountant?
A Reporting Accountant provides certain 'public' opinions required to appear in the IPO prospectus or admission document by the rules governing capital markets transactions. The Reporting Accountant provides assurance over the business’s financial track record and will also perform financial due diligence for the directors and the Sponsor or Nominated Adviser (Nomad).
The London Stock Exchange can require several reports and opinions from your Reporting Accountant in order to complete market transactions. These requirements will differ depending on the nature of the transaction and the requirements of the company's Sponsor, Nomad or other adviser. Transactions on international markets may also require different reports.
You can use the below as a guide to the kind of information you will be expected to provide. Our team works closely with other capital markets specialists in the BDO International Network around the world to ensure you get the support you need, wherever your transaction is taking place.
If you are undecided as to whether an IPO or private sale is the right option for your business, you could also consider a dual-track process which can maximise choice for your shareholders? Our guide to planning a mature business exit details the different solutions available to you.
Short form report or Report on historical financial information
The Accountant’s Report is an opinion given on your company’s three-year historical financial information and is similar to an audit opinion. This is also referred to as the “short form report”. Most capital markets transactions require at least the last three years’ fully audited accounts under IFRS or certain other GAAPs for non-EU incorporated companies.
Depending on the transaction and stock market, fully audited accounts may be needed on any significant acquisitions proposed or that have occurred in the last three years.
If the last audited year-end is not recent, then interim financial information may need to be prepared.
Opinion on pro forma financial information
For some transactions, typically those where an acquisition has been made, pro forma financial information will be prepared for inclusion in the investment circular. We can provide an opinion on whether these pro forma statements have been properly compiled. Depending on the choice of stock exchange, this opinion can be either a private report addressed to the Company and its Sponsor/Nomad or made public through the investment circular.
Long form report
This is a private due diligence report addressed to the Company and its Sponsor or Nomad. Our report will seek to identify potential issues and will typically cover the following areas:
- History of the business
- Commercial activities of the business
- Organisation structure and employees
- Financial reporting environment
- Trading results
- Assets and liabilities
- Cash flows
- Taxation
- ESG due diligence
Working capital report
The working capital report is a private report addressed to the Company and its Sponsor or Nomad. It supports a statement that Directors need to make in the investment circular concerning working capital. To create the report, we will review your projections for a post-transaction period of 18 months or more from the date of the proposed listing.
Your management team will need to prepare an integrated monthly projections model that is capable of sensitivity analysis.
Financial position and prospects procedures (FPPP)
As part of the IPO process, Directors, including Non-Executive Directors, must ensure that your company has procedures in place for establishing and reporting the company’s financial position and prospects that are appropriate for a UK public listed company. Directors are typically required to prepare a Board memo, documenting the procedures in place.
We can assist you with expert guidance on key areas of focus including what similar companies are doing and by providing sample templates.
For a main market listing and larger AIM listings the Sponsor or Nomad is likely to request your Reporting Accountant to prepare a separate report commenting on certain areas of the Companies FPP procedures.
Typical areas in respect of which procedures will be required include:
- High-level reporting environment
- Budgeting and forecasting
- Management reporting
- Significant transaction complexity, potential financial exposure or risk
- Strategic projects and initiatives
- Financial accounting and reporting
- IT environment
UK Comfort letters
In addition to the above private and public reports, as part of the UK listing process your Reporting Accountant will be expected to provide to the Company and its Sponsor/Nomad a series of private comfort letters. These include:
- Work in connection with the director’s statement in the admission document that there has been no significant change in the company’s financial position between the date of the most recent audited financial information and the date of admission
- Confirmation as to the proper extraction of financial information in the admission document
- Confirmation as to whether tax disclosures in the investment circular comply with our understanding of current tax legislation
- Any profit forecasts or estimates in the investment circular. Note that this is a complex area, requiring extensive diligence work
Comfort letters in respect of US offerings
For larger IPO’s, normally only on the main market, your sponsor may recommend a US offering which is covered by SEC Rule 144A. Where this is the case, a specialist SAS 72 or SAS 72 lookalike comfort letter is likely to be required which will need to comply with US standards (AU-C Section 920). We work closely with our specialist US team to ensure that these can be provided.
